Advice and Opinion

Demand in township property markets

The pandemic has had an impact across all sectors of the economy, the township markets included. While the rest of the country saw an increase in activity among buyers, township markets also saw a few new trends emerge.  

Following the initial lockdown, the South African property market experienced a period of unprecedented activity as low interest rates and pent-up demand drove the number of sales through the roof. This period of hyperactivity lasted longer than expected and is only now seeming to be returning to usual,” remarks Regional Director and CEO of RE/MAX of Southern Africa, Adrian Goslett.     

The effect of the lockdown extended into the township markets as well. Before the lockdown, Mohau Motaung, Broker/Owner of RE/MAX Ebenezer, explains that many RDP homeowners would hold onto their houses because an average RDP home was selling for R150,000. “After lockdown, prices doubled and they are now selling for an average of R320,000 which has created a temptation to sell.”

However, Motaung explains that not all RDP are sellable. “Some have a condition placed on the title deed that they can only be sold after ten years after the issue of title deed. Some are not for sale at all because they have a clause that says they will remain family houses and that endorsement seem impossible to waive.”

Motaung has also noticed that since Covid-19, some have chosen to stay with a partner or return to their parents and rent out their own house to generate some money to help the other parties make ends meet. “There are also these so-called ‘investors’ who put down the offer but never take transfer. Instead, they resell the property to other buyers at a higher price, making themselves huge mark ups. Lately, we have also seen a lot of cash buyers for high amounts as there has been several people who were paid out when they were retrenched due to COVID and for other reasons,” he says.

Rather than there being a shortage of sellers and cash buyers, Motaung points out that those purchasing through home finance is hard to come by in these areas. “Considering the fact that Soweto has approximately 360,000 households and over 590 listed on Property24, not to mention the many private sales that are concluded without being listed on P24, I would not agree that there’s shortage of sellers. Instead, I would say that banks do not easily approve home loan applications in township markets. In view of the fact that I am also a debt counsellor, I can mention that the banks are extra careful to lend in these areas as they stand to lose the whole investment should it be found that the bond was granted recklessly,” says Motaung.

The perception that there is a shortage of sellers in township markets stems from the fact that some do tend to hold onto their homes to pass on to the next generation. “This happens in the so called ‘traditional’, older 4-roomed houses in Soweto, but not within the new developments. Owners of the latter would always opt to sell. Interestingly, I have found that single mothers tend to buy the house for the child that they had earlier in life out of wedlock. Should they later get married, they prefer to keep the house for that child. But children who are born from the marriage are thought to be okay.”

In the Cape’s township markets, Lebo Masilo of RE/MAX Impact says that in the more established areas, such as Gugulethu, Nyanga and surrounds, communities tend to keep their homes as they have built it up and modernized it over a few generations. “Also, the security structures seem to be more established in the older areas, which makes it less attractive to sell. Many choose to keep these homes as a generational family home, even though the younger generation tends to move to more upmarket areas in the suburbs,” she says.

Cynthia Ngxanga of RE/MAX Advance operates in Umlazi in KZN, agrees that there is a desire to move away from the townships if one can afford to do so. “There is no shortage of sellers in our township markets because many want to move to the suburbs and now they are selling their houses. When they received their tittle deeds to their RDP houses, some of them sell and some don’t. Despite this, there are always clients who want to buy in townships because they can’t afford to buy expensive properties elsewhere,” she concludes.